Posted on 02/07/2025 6:48:15 AM PST by lasereye
Donald Trump has told lawmakers he wants to end the special tax treatment of private equity and hedge fund profits known as “carried interest”, setting up a potential clash with America’s wealthiest financiers.
The push by Trump — in a White House meeting on Thursday with Republican leaders from Capitol Hill — comes as the president intensifies talks over a broader tax cut bill he wants passed this year that is core to his domestic economic agenda.
Karoline Leavitt, the White House press secretary, told reporters that Trump had “laid out” his “tax priorities” to the lawmakers, including measures to “close the carried-interest tax deduction loophole”, eliminate tax breaks for “billionaire sports-team owners” — and deliver on campaign promises such as eliminating income tax on tips.
The special tax treatment for “carried interest” has been the subject of big lobbying fights in Washington for the past two decades, ever since private equity groups and hedge funds became bigger forces on Wall Street, attracting scrutiny from politicians.
It is considered a “loophole” because the profits of private equity and hedge fund managers are taxed at long-term capital rates, which are typically lower than ordinary income rates. The top rate of capital gains tax in the US is 20 per cent, compared with a top federal rate of income tax of 37 per cent.
Many Republicans and some Democrats have resisted efforts to clamp down on that preferential treatment, helping the private equity industry maintain the status quo. A previous attempt early in Joe Biden’s presidency failed.
But Trump, who had tried and failed to eliminate the special tax treatment of private equity profits in 2017, has now put it back on the table.
“The battle over carried interest is likely going to be the toughest yet,” said one strategist who works closely with the private equity industry. “Trump wanted it gone in 2017 and was stymied by Congress, but today’s congressional Republicans hardly resemble darlings of high finance and are far more willing to fall in line behind the president.”
Still, Trump’s tax plans are likely to be a boon for Wall Street and corporate America given his goal of extending the sweeping tax cuts on income he passed during his first term. But the inclusion of some more populist provisions will test how Republicans in Congress are drifting away from the business-friendly party they have traditionally been. Some Democrats in Congress were already embracing Trump’s appeal on carried interest.
“Perfect timing. I introduced a bill today to end the carried interest loophole and make Wall Street investors pay their fair share. Glad you agree, @POTUS. Time to get this done,” said Tammy Baldwin, a Democratic senator from Wisconsin, on X, referring to Trump.
The 2017 tax bill narrowed the scope of the benefit for private equity by extending the number of years an investment has to be held before the preferential treatment kicks in from one to three years. One scenario would be a further extension of that timeframe, as an alternative to a complete elimination of the loophole.
The debate over the fate of taxes on private equity profits is opening up after dealmakers entered the new year more immediately focused on the president’s antitrust regulators watering down draconian new merger guidelines, which are set to kick in next week, as well as maintaining the tax deductibility of debt and the broader tax cuts. Industry insiders have long believed efforts to eliminate carried interest taxes would run aground because it could also hit investors such as small-time property buyers.
Drew Maloney, president of the private equity industry’s main lobbying group, the American Investment Council, said the 2017 law had struck the “right balance” on carried interest.
“We encourage the Trump administration and Congress to keep this sound tax policy in place and unleash more long-term investment that supports jobs, workers, small businesses and local communities,” he added.
This ought to make DJT more popular with the Occupy Wallstreet crowd right? Everyone on the Left says they hate those rich money guys, those robber barons...
It a very good idea to put some leveling the playing field issues in the bill. Make Democrats vote against this then run ads non stop in red and purple districts about the Democrats “voting to give tax cuts to billionaires”
I don't see how this would be true.
The "carried interest" loophole seems ludicrous on its face. It allows an investment manager whose compensation is based on the performance of the investment to treat his compensation as a capital gain instead of income even though he never assumes an ownership stake in the investment itself. Treating a fee as a capital gain instead of income is nothing more than a tax policy written by Wall Street.
Carried interest is the ultimate tax loophole. It needs to go away!
I like he idea but only to the extent it will force the hedge fund partners to support lower income tax rates for everyone.
20% should be the max for all income on anybody from any source. 10% would be better. Then we can drop all of the carve outs and favoritism
Private equity companies have been buying, downsizing, and stripping the assets from US companies for 30 years. As you indicated the partners in these firms enrich themselves by using other people’s money (i.e. vulture capital) to acquire the target to be gutted while these partners receive special tax treatment on the income flow from the asset strip, without risking their own money. This is how Mitt Romney accumulated his multimillion dollar net worth. Wilbur Ross, Trump’s Secretary of Commerce in the first Trump term, was one of the worst private equity players.
Wall Street, and its bought and paid for politicians, will fight to the death to keep carried interest. As you indicated, Chuck Schumer, the Senator who represents Wall Street, will protect the vultures while portraying himself as the enemy of the wealthy and champion of the poor. The mainstream medial will not cover the fight (if there is one) over carried interest. They will rant and rave about the the giveaway to the wealthy occurring from tax rate cuts while completely ignoring the special tax breaks and loopholes benefiting wealthy progressive billionaires.
Donald Trump advocated ending carried interest in the 2016 campaign, but once elected allowed the termination of carried interest to be eliminated from the big tax bill. It will be interesting to see if he makes carried interest an issue in the upcoming tax fight or quietly acquiesces to the continuation of carried interest in order to accomplish other objectives. Watch closely to see how the art of the deal plays out.
“Perfect timing. I introduced a bill today to end the carried interest loophole and make Wall Street investors pay their fair share. Glad you agree, @POTUS. Time to get this done,” said Tammy Baldwin, a Democratic senator from Wisconsin, on X, referring to Trump.
her bill won’t be passed as written.
10% is good enough for God, it should be good enough for the government.
It's not a loophole when the law allows it to happen.
All laws are written wish ‘cut outs’...aka loopholes.
Most laws....not all.
Will this affect the morman church 200 billion secreted away?
I wish they would outlaw micro-second-trades by computers. The original purpose of the market is corporate ownership. Micro-trades don’t fit that purpose.
You forgot the /sarc tag.
If Trump is making Wall Street angry, there must be a good reason. Americans are sick of those that move money around to make money, rather than creating something of value.
good
this loopholr needs to end.
10 years retro-active
btt
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